In October 2008, President Bush enacted the Alternative Minimum Tax Relief Act of 2008, which resulted in lower taxes on labor income. According the supply-side view, as a result of this act the incentive to work ________ and the tax wedge ________.
A) decreases; increases
B) increases; does not change
C) increases; decreases
D) increases; increases

Question

Quizplus · Accepted Answer

According to the supply-side view, reducing taxes on labor income increases the incentive to work because individuals get to keep more of their earnings, which effectively reduces the tax wedge (the difference between what employers pay and what employees receive).

In October 2008, President Bush Enacted the Alternative Minimum Tax